The Challenge of Identity

All organizations evolve — sometimes owing to internal motivations or plans, and sometimes to external forces. For credit unions, the decade-long process of moving to open charters — whether in the form of a community charter or simply adding members via an indirect lending program — raises the issue of how to tell the credit union story to newcomers

 
 

All organizations evolve — sometimes owing to internal motivations or plans, and sometimes to external forces. For credit unions, the decade-long process of moving to open charters — whether in the form of a community charter or simply adding members via an indirect lending program — raises the issue of how to tell the credit union story to newcomers. They need to ask: “Why should someone join our credit union especially when there is no connection to the founding group?”

The evolution of membership from affiliation, which is serving an employee, church or member group, to one based on a value proposition is more than a change of marketing messages. Because many prospective members already have financial relationships, credit unions must present a compelling reason for non-members to join. At the same time they need to avoid the trap of “becoming just like our competition.”

Why the Issue is Urgent
Field of membership changes are not new, so why is the challenge becoming more urgent? Two trends are putting this at the top of manager’s agendas.

1. The last 24 to 36 months have been a period of almost “effortless growth.” Few managers anticipated the double-digit share inflows from members concerned with the stock market bust. Many did not have to advertise or to pay other than normal rates to enjoy fund inflows. But as the market rebounds, the days of easy growth are over. Moreover, real estate loans — especially in the form of refinancings — fueled loan growth; that demand is now mostly gone.

2. As more credit unions expand their market reach, they are increasingly running into other credit unions in the same market. It is not unusual in major cities such as Tampa, Madison, San Diego or Sacramento to find three to five large credit unions now telling the public that “anyone can join” their credit union. So how does one credit union tell the public why it is different from another—especially when the historical FOM heritage is no longer paramount?

Re-branding with New Names
This effort at market repositioning is sometimes most clearly seen in name changes. Some credit unions make an effort to create a whole new “brand” identity while others try to incorporate a thread of continuity with the past.

A sampling of efforts at new identities are:

Austin Metropolitan to Velocity
Banta Community to Prospera
Seattle Telco to Watermark

Several approaches that retain a link with the past include:

Iowa Postal becomes First Class
IBM Mid America Employees becomes Think
Marine Air changes to Patriots
Dallas Postal becomes Neighborhood

Some credit unions still retain a name after the sponsor or employer has gone away, such as GTE Federal Credit Union, because the credit union has established its own identity. In every case, however, the challenge is how to communicate value or promise via brand to prospective members.

How to Grow New Members

At two recent meetings credit union managers described this challenge as one of self-definition. For some the issue was how they could differentiate themselves from their peers. For others, who had decided against a broad public appeal, the tactic was to find a new point of difference from their historical roots. In both cases the question was how to recruit new members as the traditional sources of growth peter out.

Several managers said they felt the challenge was that of learning how to manage the more complex range of choices facing a “public” institution. Growth for these, they said, requires a different set of processes, ones dealing with the likes of branding, site selection or partnering. But others said that with rare exceptions, an individual credit union would not be able to outbranch, outmarket or even outflank the major competitors on most operational dimensions — credit unions are just too small.

The Search for Differentiation
A number of credit unions at the conferences shared their recent efforts. For example, one credit union that had the words “community” and “first” in its name, said “we try to live our name.” This credit union wants to become the local financial institution. To do this it has put branches in four high schools as one aspect of an effort to raise financial literacy in the areas it serves. The manager believed that credit unions were “all about people” and this meant investing in education for both staff and members.

Another CEO, whose credit union has moved from serving municipal employees to a community of several million, said he and his credit union were focusing on serving their market’s immigrant populations. The manager reported that 12% of the U.S. population and 15% of full-time employees are foreign-born. Many of these persons have little experience with credit or savings but rather deal in cash. This credit union is “going back to its roots” to focus on serving the new generations of Americans.

Another credit union reported a similar strategy of returning to its core. It had an approved conversion to a community charter but, once all of the options were examined, decided instead to focus on the educational community from which it had been created. The focus would be on recruiting students and adding value to all services by helping members “be smart with their money.” The education focus was based on the members’ need for advice, a critical factor in the choice of many financial products.

Another credit union, also shunning the public media, decided to refocus on SEG marketing. It is creating multiple Websites with different URLs — albeit with a common home banking solution — to customize its marketing to its key groups. By reinforcing the “affiliation” and target marketing strategy, the credit union seeks to maintain its name and historical connections even as the number of members still working with the primary employer becomes a minority of total membership.
Another credit union that says it is “numbers driven” tries to communicate its unique value by declaring an annual bonus dividend. Each of the last five Decembers it has declared a rebate, now totaling more than $12 million. This rebate tactic is how the credit union demonstrates its tangible difference from other financial institutions.

Identity and Advantage
Certainly the move to open charters has created a demand for new capabilities in all areas of “retailing.” But the challenge in an economy with far more financial institutions per capita than any country in the world is not just mastering new techniques. It is how best to answer the question of why we exist to serve members when many other organizations claim the same. The solutions credit unions devise may be the key to sustaining the double-digit momentum of the past several years.

 

 

 

May 31, 2004


Comments

 
 
 
  • We're in the midst of forging our new brand identity. It's a process. This article points out the potential pitfall in alienating the original FOM by roving too far from your existing identity.
    Scott
     
     
     
  • This is exactly what I have been trying to communicate to my board! How fitting.
    Scott
     
     
     
  • This is a great article.
    Scott Trubisz
     
     
     
  • Very Interesting
    Anonymous
     
     
     
  • Our credit union recently was approved for a communitiy charter. The name had been changed 10 years ago to reflect the diverse membership (from Governmental Employees CU to Members CU) Now I wonder if another name change might help make the communtiy aware of the open membership.
    Anonymous
     
     
     
  • This is exactly what I have been trying to communicate to my board!
    Anonymous
     
     
     
  • We are facing the very challenges in your article. Thanks!
    Anonymous
     
     
     
  • We're in the midst of forging our new brand identity. It's a process. This article points out the potential pitfall in alienating the original FOM by roving too far from your existing identity.
    Anonymous
     
     
     
  • Differentiation and branding our key to the long-term success of any institution. This is what we teach at BTC. Your article hits the nail on the head. Great piece. Kenneth C. Bator President Bator Training & Consulting, Inc.
    Anonymous
     
     
     
  • Right on the mark. This was part of the discussion at our Sr. Management meeting yesterday.
    Anonymous